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Understanding Student Loans

With the rapidly rising cost in education coupled with the fact that Americans aren't saving as much as they need, student loans are inevitable. You can plan and prepare to the best of your ability—here's what you should know.

Generally speaking, there are two types of loans: subsidized and unsubsidized. The basic difference between the two is who pays the interest while the student is in school. With a subsidized loan, the government pays the interest until the student begins his or her loan repayment period. With an unsubsidized loan, the student pays the interest.

Each student is limited to specific amounts each year that they can borrow in subsidized loans. When borrowing becomes a necessity, it is recommended that students take the max available to them in subsidized loans first, then move to unsubsidized loans. There are several types of unsubsidized loans available to students and their parents, so it is recommended that you speak with an advisor to map out the best course for you and your child.

However, it's important to know that the loan repayment period on any student loan is vitally important. Student loans are not counted towards a bankruptcy and must be repaid. If a student defaults on their loans in any way, they can have their wages garnished, their tax refunds withheld, and/or they can be sued. It is important that student loans be kept current.

How are you fairing in your college preparations for your kids? Are student loans going to be in the picture? For those of you already there, how did you handle student loans, and what advice can you give parents getting ready to have kids in college? [College News]

I have a little under $20,000 in student loans, and the best thing I did was to make sure I understood my loans and repayment plans before I graduated. I spoke regularly with my school's financial advisers about what kinds of loans I had, how they worked, the best ways to consolidate, and how to work out my repayment plans. And generally speaking, student loans are "good debt" because the interest rates on them are so low.

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